Welcome to Blah
No, that's not the name for some strange amusement park or vacation spot. Instead it appears to be tthe title that perfectly describes the state of the U.S. economy right now. Not to be the person that says ‘I told you so', but a lot of the negative data releases did not come as a total surprise. Weaker profits: check. Slowdown in business investment: check. Sluggish labor market: check. The list goes on. Of course, let's not even bring up soaring energy and food prices or the flagging dollar.
Here's the rub. Even though everyone's mood seems to have just turned sour (see here and here for examples), some positive news is out there. And this is what one would expect in a stagnant economic environment: good news is followed by bad news, or vice versa. This week, for example, things appeared to be heading in a more positive direction as the dollar was headed higher after Treasury Secretary Hank Paulson reiterated a strong dollar policy. Fed Chairman Ben Bernanke followed up with comments that inflation concerns are mounting and signaled a likely end to interest rate cuts. Oil prices declined and equity markets applauded. All this was undone by Europe's central banker as he raised the alarm over EU inflation and suggested the possibility of raising interest rates at the ECB's next meeting. In turn, the dollar tanked against the euro, crude oil prices skyrocket by their highest daily amounts ever during the past two days.
Same-store sales showed some promise in May, increasing 2.8 percent compared to last year. Among the biggest winners were discount chains and wholesale clubs such as Wal-Mart, B.J.'s and Costco. Whether this is a temporary boost from the economic stimulus package remains to be seen, but discounters appear well-positioned to take advantage of the economy's less-than-stellar performance. Only a day later, we were reminded of why prospects for consumer spending have become so shaky. The unemployment rate shot up to 5.5 percent (from 5 percent) in May and payrolls contracted for the fifth consecutive month. Although some of the increase can be attributed to quirky seasonal factors related to teens and young adults joining the labor force, the job market has clearly hit a rough patch. At this point, certain summer jobs look pretty appealing.
06-06-2008 3:45 PM